Automated Trading System

ABSTRACT

A computer trading system includes a quote screening function configured to accept quotes specifying a quote amount in a price where the quote amount is greater than a minimum quote amount to produce screen quote messages and to reject quotes specifying a quote amount less than the minimum quote amount. A market view generator generates market views from those quotes which specify an amount greater than or equal to the minimum quote amount. An order screening function only accepts orders specifying an amount less than a maximum transaction amount submitted in response to the market views to produce screened order messages. A transaction processor receives screened quote messages and screened order messages and matches appropriate messages with each other. The minimum quote amount is substantially equal to or greater than the maximum transaction amount whereby a screened order message can be matched entirely with one screened quote message.

CROSS REFERENCE TO RELATED APPLICATIONS

The present application is a continuation of application Ser. No.13/487,306, filed Jun. 4, 2012, which is a continuation of applicationSer. No. 10/202,827, filed Jul. 26, 2002, and issued as a U.S. Pat. No.8,209,254, issue date Jun. 26, 2012, the entire contents of which areincorporated herein by reference.

FIELD OF THE INVENTION

This invention relates to an automated trading system. In particular,the automated trading system allows subscriber parties to buy and sellinstruments in a single transaction up to a predefined maximum value.Typically, but not exclusively, the automated trading system may be usedto enable spot foreign exchange dealing with a maximum transaction valueof approximately 1 million currency units (e.g. $1 million, in the caseof USD/JPY and EUR 1 million in the case of EUR/USD)

BACKGROUND OF THE INVENTION

In the financial exchange market, smaller and regional banks frequentlyconduct foreign exchange deals for small amounts of currency, forexample up to approximately 1 million units, (so-called Asmalls®transactions) with larger or global banks. When dealing withtransactions of this type, the party wishing to buy or sell the currency(the Amarket User®) has to obtain Aquoteso for current bid and/or offerprices from a number of larger players (Amarket Makers®) who deal inthat particular currency in order to try to obtain an optimal price. Themarket user responds to a quote by submitting an Aorder® to buy or sell.If the market user is not prepared to conclude the transactionimmediately, he cannot guarantee that a particular quote will remainvalid whilst he checks with other market makers to try to locate thebest deal. We have appreciated that a considerable volume of directdealing conducted on a daily basis is smalls transactions. The number ofmarket users conducting these deals and the number of deals transactedper day is high. Although the amount generated by such smalls businessis generally only a relatively small proportion of the overall businessconducted by market makers, it requires a larger proportion of dealertime than some larger value business transactions. This makes the knowntrading systems inefficient. The transaction process is time consumingand inefficient for the market makers who have to respond to a largenumber of requests for bid/offer prices on an ad hoc basis and onlyachieve a modest amount of business on such smalls transactions comparedto their overall turnover. The overhead per transaction for both themarket users and market makers is therefore high and the satisfactionrate low.

U.S. Pat. No. 5,375,055 teaches a computerized trading system fortrading of financial instruments between traders trading at a pluralityof trading floors. The trading system provides for compositetransactions where, in order to fulfill a taker deal, the transaction isexecuted between the taker and a plurality of makers. For small valuetrades, this system becomes impractical, requiring complicated andunnecessary processing.

We have appreciated the problem of encouraging submission of quotes fortrading whilst avoiding the technical difficulty of increased unwantedmessage flow.

SUMMARY OF THE INVENTION

The automated trading system of the present invention aims to overcomeor ameliorate these disadvantages.

The invention resides in two broad aspects. First, constraints areplaced on the amount of an instrument that can be specified in a quoteor an order. This is used to encourage trading whilst avoiding thegeneration of too many quote or order messages which could not match,unnecessarily degrading performance of the system.

Second, users are categorized and constraints placed on the matching ofquotes and orders depending upon the categorization of the user. Thisagain encourages trading whilst preventing unwanted matching betweencertain categories of user, which again could degrade performance of thesystem.

The invention thus resides in providing an automated trading system forsimplifying the execution of limited value transactions between partiessubscribing to the system.

It further resides in providing an automated trading environment usingan automated trading system to execute transactions valued below amaximum transaction value between subscriber parties located indifferent geographical locations and using different computer equipmentand network connections.

More specifically, in the first aspect the invention resides in acomputer trading system for trading instruments between counterpartiesof the type in which quotes to bid or offer instruments are matched withorders to buy or sell instruments, comprising:

-   -   a quote screening function configured to accept quotes        specifying a quote amount and a price where the quote amount is        greater than a minimum quote amount to produce screened Quote        Messages, and to reject quotes specifying a quote amount less        than the minimum quote amount;    -   a market view generator configured to generate market views from        those quotes which specify an amount greater than or equal to        the minimum quote amount;    -   an order screening function configured to only accept orders        specifying an amount less than a maximum transaction amount        submitted in response to the market views to produce screened        order messages, and    -   a transaction processor configured to receive screened Quote        Messages and screened order messages and to match the screened        order messages with appropriate screened Quote Messages.

Preferably, in the first aspect the minimum quote amount issubstantially equal to or greater than the maximum transaction amount,whereby a screened order message can be matched entirely with onescreened Quote Message. This ensures that any order to buy/sell can becompleted in a single transaction with a matching quote to bid/offer.

Preferably, in the first aspect the market view generator is arranged:

-   -   to modify each screened Quote Message when an order message is        matched therewith by decrementing the amount specified in each        screened Quote Message, and    -   to remove each screened Quote Message from the market views when        the amount specified in each screened Quote Message is less than        the minimum quote amount.

This feature further ensures that, as quotes are matched, only quoteswhich can match with an order in a single transaction remain available.

A further preferred feature in the first aspect is that the orderscreening function is further configured to segment an order specifyingan amount greater than the maximum order amount into a first reducedvalue order specifying an amount which is less than the maximum orderamount to produce a screened order message and at least a second reducedvalue order. This feature ensures that any order entered can be matched,at least in part, with a quote in a single transaction, therebyincreasing transactions whilst avoiding flows of non-matchingquote/order messages.

Preferably, in the first aspect the transaction processor is configured:

-   -   to store screened Quote Messages in a quote available store;    -   to decrement the amount specified in a given screened Quote        Message in the quote available store each time a screened order        message is matched therewith; and    -   to remove the given screened Quote Message from the quote        available store when the amount specified in that given screened        Quote Message falls below the minimum quote amount.

This ensures, together with features discussed above, that only QuoteMessages which can be matched with order messages in a singletransaction are made available in the system.

In the second aspect of the invention, the invention resides in acomputer trading system for trading instruments between parties of thetype in which quotes to bid or offer instruments are matched with ordersto buy or sell instruments, comprising:

-   -   a user parameter store arranged to store a user category        parameter specifying whether each party is categorized as a        market maker or market user; and    -   a transaction processor arranged to prevent parties categorized        as market users from submitting quotes.

The invention offers market makers and market users the opportunity toearn from the Asmalls® market where banks are less price sensitive andto do this with minimal dealer intervention. It also offers marketmakers the opportunity to turn nuisance business into revenue generatingactivity and market users the ability to cover small amounts quickly andconveniently in conveniently sized units, whilst avoiding degradingsystem performance.

BRIEF DESCRIPTION OF THE DRAWINGS

Embodiments of the present invention will now be described withreference to the accompanying drawings of which:

FIG. 1 is a logical diagram of a computer trading system embodying theinvention;

FIG. 2 is a logical diagram of a maker floor of the computer tradingsystem;

FIG. 3 is a logical diagram of the computer trading system showingmessage flow;

FIG. 4 is a logical diagram of the computer trading system showing thekey functional components; and

FIGS. 5 a & 5 b are flow charts showing the functions performed by theautomated trading system during a transaction.

DESCRIPTION OF BEST MODE

In a limited value, or Asmalls®, transaction system, a number of partieswish to trade instruments. The embodiment of the computer trading systemwhich will now be described enables spot dealing of foreign currencies.In this description the terms computer trading system or automatedtrading system are used to describe the system as a whole. The termAtrading System® is used to refer to a subset of the whole system. Itwill be immediately apparent that the invention could be used to tradeany instrument where the maximum transaction value for a singletransaction is limited.

Before the functional elements of the automated trading system and theirlocation are described in detail, a brief overview of the computertrading system will be given.

Transaction prices are determined by market makers who offer to sellcurrencies at Abid® prices and/or offer to buy currencies at Aoffer®prices (jointly termed Aquote Prices®). The bid and offer prices arespecified by currency pairs, for example GBP/USD. The market makers mayspecify bids and/or offers for any number of currency pairs bysubmitting suitable Aquotes®. Quotes include at least a quote price, anamount indicating the value of the instrument that they are prepared todeal, and preferably include data identifying the currency pair andtransaction type. Parties wishing to use the automated trading systemwill be required to subscribe to the service provider. Market makers maybe entitled to subscribe free to the automated trading system whilstmarket users (or takers) would be charged a standard fee for theirsubscription and also charged per transaction (corresponding to abrokerage fee). Subscribing parties are categorized as market makers ormarket users depending on whether they are making the market or merelytrading at prices set by the market Makers. Additionally, a subscribingparty may be categorized as both a market maker and a market user andmay be allowed both to submit quotes to the trading system and react tosubmitted quotes in an attempt to execute a transaction.

Market makers are typically large banks but may, for example in’ thecase of specialist markets, be a smaller or small bank responsible sayfor making the market in a niche currency. Market users similarly aretypically smaller or small banks but may be individual companies orlarge banks trading in an under used instrument. Market users do not setthe prices of bids and/or offers available via the automated tradingsystem but only react to those prices submitted to the system by marketmakers.

An important aspect of the automated trading system is that a maximumtransaction amount for a single transaction is rigidly imposed.Typically the maximum transaction amount is set at a value of 995,000currency units (e.g. United States Dollars or USD). A market makersubmitting a quote must indicate how many currency units he is preparedto trade at the quote price (the Aquote Amount®). Quotes offered bymarket makers are only used by the system as a whole if they areassociated with an amount which is at least as large as the minimumquote amount which is preferably substantially equal to the maximumtransaction amount imposed by the automated trading system. Thus, atleast one transaction with a market user is possible for each marketmaker price seen by a market user. There is, therefore, never arequirement for the automated trading system to Awork the Balance®, thatis to find a second Maker to pick up an outstanding amount of a singletransaction.

Market makers who submit quotes specifying a higher amount benefit whena number of transactions are executed without any intervention from adealer at the market maker. Preferably, the minimum quote amountspecified in a quote accepted by the automated trading system is 1 unitlarger than the maximum transaction amount imposed by the system.

Typically, the minimum amount acceptable in a quote is 1,000,000dollars.

Transactions are indicated by market users submitting an orderspecifying an amount and identifying an instrument and price whichtogether specify the deal that they wish to enter into. If a market usertries to initiate a transaction for more than the maximum transactionamount accepted by the automated trading system, the order request maybe handled by the system in one of three ways. Firstly, the system maysimply reject the order request outright. Secondly, the system maysegment the order request into a first portion specifying an amount lessthan or equal to the maximum transaction amount, match the first portionwith the appropriate market maker quote and reject a second portionspecifying the remaining amount. Thirdly, the system may operate asdescribed above in the second manner except that instead of summarilyrejecting the second portion, it may either try to match that portionwith the same or another market maker quote or pass the second portionto a subsidiary system for possible automatic processing. The system maybe configured to restrict matching of the various portions of theoversize order to a single market maker quote thereby constraining allthe component parts of the single oversize order to be transactedbetween a single market maker and the market user.

The automated trading system is equipped with a credit management systemwhich ensures that market users are only able to view prices from marketmakers with whom they are authorized to enter into transactions.Authorization to enter into transactions is monitored by way ofbilateral credit ratings maintained by a credit management system. Whensufficient bilateral credit is available between market user/marketmaker counterparties, the market maker=s price quote is included in thegeneration of a market user specific Market User View. This reducesinstances where a market user Dealer views a price which he is unable toobtain.

In the computer trading system incorporating a preferred embodiment ofthe invention, the system functionality is split over a number ofseparate, but interconnected, logical components indicated in FIG. 1. Abrief description of the interconnection of the various componentswithin the computer trading system follows. Details of the functionalityof the automated trading system and where the various functionalityresides in the automated trading system is described later.

The computer trading system 2 provides a plurality of workstations 10 attrading floor 11 of the various market maker and market user partiessubscribing to the service provider operating the trading system. Theworkstations of a trader are bi-directionally coupled to a tradingsystem 13. The trading system 13 is that part of the whole computertrading system which deals with matching of quotes and orders anddistribution of market views and includes at least one Broker Node (BN)12. Broker Nodes 12 are physically hosted by the ‘respective party andmay hold proprietary information not for general circulation to othersubscribers of the automated trading system. All communication betweenthe automated trading system and market maker and market userworkstations is routed through the appropriate Broker Node 12.

A BN 12 is typically a dedicated client side computer under control of aclient floor administrator. A BN 12 maintains transaction records,credit limit information for any number of parties with whom thesubscriber is prepared to trade and any other confidential informationassociated with the trading floor. A market maker BN 12 acceptssubmitted quotes. Under the control of the central city node 18, a BN 12imposes restrictions on the type of data message that may be passed toand received from the automated trading system, for example, bypreventing market users from submitting quotes.

The service provider defines cells covering specific geographiclocations. Each separate geographic location is provided with a CityNode (CTY) (here shown combined with the central node for simplicity). ACTY acts as an information router. Broker nodes are bi-directionallycoupled via a suitable network to the appropriate CTY. Thus a CTY maycommunicate with a plurality of Broker Nodes 12 but a Broker Nodecommunicates with only one CTY.

The automated trading system is provided with at least one ArbitratorNode (ARB) 16. For simplicity, only one ARB 16 is shown in FIG. 1 andthe following description assumes that a single ARB 16 is provided. Thefunction of the ARB 16 is to perform high level processing of dataoriginating from a plurality of Broker Nodes 12 covering a plurality ofcells and to distribute this information across the automated tradingsystem. The ARB 16 is therefore coupled via a suitable network to theplurality of Broker Nodes 12 and to the plurality of CTYs.

A central node (CNL) 18 is also provided in the trading environment. TheCNL 18 is bi-directionally coupled to the ARB 16 and indirectly coupledto the Broker Nodes 12 via the network of CTYs 14. The CNL storesinformation on the system parameters of the automated trading system.

FIG. 2 shows the logical elements of a maker floor. A trading floorcomprises a number of workstations 10 logically connected together so asto provide traders of a particular concern (e.g. bank) to trade withtraders at other trading floors (typically other banks). In this case,the trading floor is categorized as being for makers, that is fortraders that submit quotes.

In addition to manually submitting quotes, a price engine 26 is providedwhich allows prices to be fed from other systems and to be converted toquotes at workstations 11. The actual implementation of the conversionof price feeds to quotes is not required to be discussed herein. It issimply noted that some workstations at maker trading floors 11 may havethis functionality and that this will be used as part of usercategorization discussed later. The quotes derived from prices at theworkstations are provided to the trading system 13 as previouslydescribed, but may be identified as being automatically derived from aprice feed.

FIG. 3 shows the overall message flow between separate logicalcomponents. The price engine 26 of a maker trading floor provides pricesmessages 40 to a workstation designated as a maker workstation 11. Theprice messages are then converted to quotes at the maker workstation andare transmitted to the trading system 13 as quote order messages 44. Thetrading system provides market data 42, 46 to maker and takerworkstations in the whole system providing market views. The marketviews include prices of the instrument to be traded and also aninstrument type where the system can trade more than one instrument. Inresponse to a price of quote displayed in a market view, a trader at ataker workstation may submit an order, which is transmitted to thetrading system 13 as a transaction order message.

FIG. 4 is intended to aid description of the functional elements of theautomated trading system. The various functional elements are, in thepresently preferred embodiment, distributed between, and in some casesover, the various components shown in FIG. 1.

In FIG. 4 market maker and market user subscribers to the automatedtrading system connect to a communication network 20 via Broker Nodes 12to which the trader workstations 10 are coupled. The network may be aVirtual Private Network (VPN), LAN or WAN or the Internet, World WideWeb. The trading system 13 is connected to the network 16 at a point inthe network which is conceptually between the market user workstationsand the market maker workstations.

The functional elements of automated trading system 22 include quotescreening means (for example a quote screening function 24), market viewmeans (for example a market view generator 28), matching means (forexample a transaction processor 30) and order screening means (forexample order screening function 32).

Communication of all prices from market makers to market users occursthrough and is controlled by>the trading system 13 part of the wholecomputer trading system 2. Routing of signals to and from functionalelements (and to and from the network 20) is controlled by the tradingsystem 13.

The automated trading system 13 receives data signals or AMessages® frommarket maker workstations and market taker workstations. These signalsare fed to the appropriate functional elements, or components, of thetrading system where they are processed and appropriate responses arecommunicated to the market makers and market users via the network.

Details of the functional elements of the automated trading system willnow be described in more detail.

Quote Screening Function

The quote screening function 24 receives all quotes submitted to theautomated trading system. The purpose of the screening function 28 is toscreen all quotes and to reject quotes specifying an amount which islower than the minimum quote amount imposed by the automated tradingsystem. Quotes specifying an amount equal to or greater than the minimumquote amount are passed as screened Quote Messages from the screeningprocessor to the market view generator. As soon as the specified amountassociated with a quote in the screened Quote Message falls below theminimum quote amount, the Quote Message is rejected. This may occur fromthe outset if the quote submitted by the market maker initiallyspecifies an amount less than the minimum quote amount or may occurafter one or more transactions have been executed such that the amounthas been decremented to take account of any executed transactions and indoing so has fallen below the minimum quote amount.

The functionality of the quote screening function is provided by theworkstation which receives the quote provided by a trader on a directfeed and conducts the initial check that the quote satisfies the minimumquote amount. The functionality of the quote screening function is alsoprovided by the broker nodes 12 which verify that the minimum quoteamount is met. The CNL 18 provides for configuration of systemparameters such as the type of trading floor (whether a particular partyis a market maker, a market user or both), the minimum amount for whichquotes will be accepted (which may be more than the maximum transactionamount but will not be less than the maximum transaction amount) andmaximum transaction amount itself. These parameters define the scope oftransactions permitted by the automated trading system. Data signalscontaining the parameter for the minimum quote amount are communicatedto the ARB 16 from the CNL 18. The ARB 16 monitors the size of theamount specified in each Quote Message and removes a Quote Message ifand when the amount falls below the minimum quote amount. Thus the ARBalso provides some quote screening functionality.

When a Quote Message is rejected by the quote screening processor, theARB communicates a Quote Rejection Message to the market maker BrokerNode (MBN) responsible for the Quote Message. The MBN generates an errormessage which is used to alert the floor administrator that a quote hasbeen rejected by the automated transaction system because the amountspecified in the quote was below the minimum quote amount set by theautomated trading system.

The screening processor 24 may additionally normalize all Quote Messagesto ensure that they conform to the automated trading system standard.Normalization may be performed before or after screening the quote toconfirm that the specified amount is greater than the minimum quoteamount. Normalization is achieved by recognizing different formats forthe same transaction type and instrument and converting the data to astandard format.

Market View Generator

The function of the market view generator 28 is to generate, for eachmarket user, a Market user View which is communicated to the market userover the network. The market view generator 28 is coupled to the quotescreening function 24. Market User Views must include enough informationfor the market user to decide whether or not he wishes to deal on thespecified terms. The Market User Views may be market maker prices oralternatively, could be more sophisticated indicating for example howfar a market maker price is from a given price.

Only Quote Messages which specify an amount of at least minimum quoteamount which is greater than the maximum transaction amount (whethermanually entered by a market maker dealer or automatically generated)are communicated to the market view generator 28 by the quote screeningfunction 24. Hence, the Market User Views only include prices which arevalid for transactions of at least the minimum quote amount on hence themaximum transaction value. This in turn means that the automated tradingsystem is never required to Awork the Balance® of a transaction becauseat least one transaction is possible for each Screened Quote Messagereceived by the market view generator 28. Any trade executed by theautomated trading system will, therefore, be conducted between a singlemaker and a single market user.

The functionality of the market view generator 28 is provided by the ARB16 in conjunction with bi-lateral credit information held at both marketmaker and market user Broker Nodes 12 which is communicated to the ARB16. The generated Market User Views are distributed to the respectivemarket users by the CTYs 18.

The market view generator is preferably configured to generate for eachmarket user a Customized Market User View. Customization may takeaccount of the subscription type of the market user. For example, onesubscription type may entitle market users to view an anonymous pricefor a smalls deal whilst another type of subscription may entitle marketusers to view the prices of a number of market makers with details ofwhich price is being quoted by which market maker. This requires twotypes of Market User View, Dealable Prices and Executable Price Lists.Both are generated by the price feed generator.

A ADealable Price® is the best price for the particular instrument/tradetype (i.e. buy or sell) being offered by any market maker. Preferablythe Dealable Price is restricted to the best price for the particularinstrument offered by a market maker with whom the market user isauthorized to transact. A Dealable Price Message does not contain anyinformation regarding the market maker offering the price and is,therefore, anonymous.

To generate a Dealable Price, the market view generator compares quoteprices provided in Quote Messages for an instrument and selects the bestprice. The Dealable Price is communicated to the respective market userworkstation where it is displayed.

The market user workstation may be capable of displaying Dealable Pricesfor a number of different currency pairs. A market user dealer mayselect, from a list on the display, which currency pair Dealable Pricehe wishes to view. The market user sees only one Dealable Price pertransaction type. A market user may, for example, view one DealablePrice each for buying GBP/JPY, selling GBP/JPY and for buying USD/JPYand will see a total of 3 Dealable Prices.

As Quote Messages specifying an amount less than the minimum quoteamount and hence the maximum transaction value are rejected, at leastone market user will theoretically be able to complete a transaction atany Dealable Price. All smalls transactions conducted using theautomated trading system will be conducted between two parties in asingle hit transaction.

The automated trading system may be configured to provide market userswho regularly conduct large amounts of smalls transactions access toprices for a certain currency pair from a number of market makers asshown in FIG. 3. The market users for whom this service is available areidentified by the market view generator 28 causing the market viewgenerator 28 to generate an Executable Price List by incorporating anumber of the prices rather than selecting the best price.

Transaction Function

The transaction function 30 is configured to receive Order Messagessubmitted to the automated trading system 22 by market users wishing toinitiate a trade at a price quoted by a market maker. It resides at theARB 16 and matches market user Order Messages to market maker QuoteMessages. In conjunction with the market maker and market user BrokerNodes 12 of the relevant counterparties, it verifies and completes thetrade.

It is possible that several Order Messages are received from one or moremarket users in response to a single Quote Message and that the totaltransaction amount of all the Order Messages would exceed the amountspecified in the Quote Message. If this is the case, the automatedtrading system 10 recognizes that there are conflicting Order Messages.It selects one or more Order Messages for execution. A warning is sentto market users of the remaining Order Messages that the quote price waswithdrawn prior to their Order Message being processed.

Order Messages which are selected may ultimately result in a trade beingexecuted between the market maker and market user counterparties and thetrade being recorded by the automated trading system 22. The transactionfunction may, or may not, execute further checks on the credit status ofone or both parties before it finally clears a matched Order Message andQuote Message for a trade execution. Once a transaction has beenexecuted, Transaction Confirmation Messages are generated by thetransaction processor and communicated to both the market maker andmarket user counterparties. Details of the transaction may be printed atthe market maker and market user. The bilateral credit between thecounterparties is amended as necessary and the amount specified in theQuote Message of the market maker is decremented by the amount of theexecuted trade. The adjusted Quote Message is rescreened and rejected ifthe amount specified has fallen below the minimum quote amount.

The automated trading system 22 may also store a limit on the number ofdeals per day for a market maker with a particular market user, amaximum market maker credit limit for each market user and/or a maximummarket maker debit limit for each currency pair and any appropriaterunning totals. When a running total reaches the maximum credit limit,the transaction processor 30 may prevent execution of a transactionbetween the two parties.

The ARB 16 performs the function of the transaction function, matchingmarket maker Quote Messages with market user Order Messages.

Order Screening Function

The amount specified in an order is constrained to be below a maximumtransaction amount. Initially this function is provided by the marketuser workstation.

The value of trades permitted by the automated trading system may bealso constrained to discrete values, for example, the minimum trade maybe 5000 units and trades sizes of 5000 units intervals only (i.e.10,000, 15,000 etc.) may be allowed. These detailed system parametersare stored by the CNL and accessed as required by, or transferred to,the ARB 16. The ARB 16 rejects Order Messages which request a trade ofan unsupported amount. If a submitted Order Message is unsupported bysmalls, for example if the size of the trade is greater than the maximumtrade size supported by the smalls system or if the size of thetransaction specified is a non-standard size it is advisable that themarket user is alerted. The ARB 16 generates an error message which iscommunicated to the particular market user BN to alert the market userfloor administrator, or particular work station user that the automatedtrading system cannot accept the Order Message.

In an alternative embodiment, the automated trading system may beconfigured to process partial amounts of Order Messages where the amountspecified is greater than the maximum transaction value of the SmallsSystem. In such an embodiment, the Aoversized® Order Message (specifyingan amount greater than the maximum transaction amount) is segmented intotwo or more reduced value Order Messages, one or more of which may bematched with an appropriate Price Message and executed.

For example, if the maximum transaction value is $1,000,000 and theamount specified in a particular Order Message is $1,500,000 theoversized Order Message may be segmented into a first reduced valueOrder Message specifying $1,000,000 and a second reduced value OrderMessage specifying $500,000. The first reduced value Order Message wouldthen be matched with an appropriate Quote Message and the reduced valuetransaction of $1,000,000 executed between the market user submittingthe oversize Order Message and a market user whose Quote Message isindicated.

The second reduced value Order Message may then either be rejected andthe market user notified that that portion of his Order Message wasrejected or, if the system allows, the second reduced value OrderMessage may be matched with a Price Message to result in a secondtransaction for the remaining $500,000. The second transaction will alsobe conducted in a single deal but may have a different market maker ifthe system allows.

The automated trading system may be set up such that the transactionfunction only allows the component parts of an oversize buy/or sellorder indicated by an oversize Order Message to be transacted between asingle market maker and the market user. Any components which wouldexceed the amount specified by the market maker in his Quote Messagewould then be rejected. There would be no opportunity for the remainingcomponents to be transacted between the market user and one or moredifferent market makers.

It will be obvious to one skilled in the art that an oversize OrderMessage specifying an amount more than two or more times greater thanthe maximum transaction value could be further segmented. Wheresegmentation of an oversize Order Message is permitted by the automatedtrading system, the functionality is performed by the transactionfunction. It remains true to say that there is a strict maximumtransaction amount imposed by the automated trading system operating inthis second manner because any oversize Order Message if executedentirely, is executed in at least two separate transactions. No singletransaction is executed for an amount above the maximum transactionvalue of the trading system.

Credit Management System

A credit management system may be provided as an integral part of themarket view generator 28. The task of the credit management system is tocustomize Market User Views. To do so it maintains bi-lateralauthorization information between market maker and market usercounterparties. Using a credit management system, the Market User Viewsmay be made to reflect prices at which the market user is able to trade.

Any number of market users may be interested in selling to or buyingfrom a market maker at the quote price specified in the Price Message.Whilst a particular market maker may be prepared to deal with aparticular market user he may impose a limit on the value of theirtransactions to limit his exposure with that market user or he may notbe prepared to deal with that market user at all. Similarly, marketusers may wish to limit the value of their transactions with aparticular market maker or to avoid dealing with a particular marketmaker. In order to establish an efficient automated trading system,details of the circumstances under which market makers and market usersare prepared to deal with each other must be stored and updated.

U.S. Pat. No. 5,375,055 teaches credit management for an electronicbrokerage system. Its teaching is incorporated herein by reference. Inparticular, U.S. Pat. No. 5,375,055 teaches credit limit administrationmeans for automatically determining whether a predetermined level ofcredit is currently respectively available between two parties anddealable price processing means responsive to price quotation messagesas well as to the credit limit administration processing means forautomatically transmitting dealable price messages to terminals of atleast one party. The Dealable Price messages are derived only from pricequotation messages from those parties for which the credit limitadministration means has determined that the predetermined level ofcredit is currently available on a bilateral basis both from and to theparticular party.

Preferably a restricted version of the credit management system of U.S.Pat. No. 5,375,055 is used in the automated trading system 2. In thecontext of the present invention, the price quotation messages describedin U.S. Pat. No. 5,375,055 are Quote Messages (whether automatically ormanually generated). If the credit management system of U.S. Pat. No.5,375,055 is used, it is preferably restricted to prevent automatonbetween two market makers. Market users may wish to sell currency or buycurrency and theoretically it would be possible for two market users toexecute a transaction meeting both their requirements. However, this isprevented in the automated trading system of the present invention.Market users are not permitted to submit Price Messages quoting pricesand direct transactions between market users are, therefore, prevented.Thus, matching can only occur between a market user and a market maker.

When the credit management system is used, each Dealable Price and allentries in an Executable Price List represent the best price or all theprices respectively available to the particular market user at that timefor a particular transaction taking into account counterparty creditlimitations. It may, therefore, not represent the best price covered bythe system.

General Operation of the Automated Trading System

The general operation of the automated trading system will now bedescribed with reference to the flowcharts of FIG. 5 a and FIG. 5 b.FIG. 5 a shows the process of quote submission and 5 b shows the processof quote and order matching and the flow of information required for theautomated trading system to operate and culminate in execution of atransaction.

In FIG. 5 a, the screening function may receive quotes at 62 both manualquotes at 61 and Automatic Quotes at 60 generated automatically fromfeeds but customized according to a market maker=s requirements. Quoteswhich specify an amount which is less than the minimum quote amount ofthe automated trading system are rejected at 64 and the remainingscreened quotes converted to Quote Messages at 65 and are subjected tocredit management at 66. When the amount specified in a market maker=sQuote Message falls below the minimum quote amount, the Quote Message isautomatically removed from the system regardless of the size of thetransaction which caused the removal. This encourages market makers tospecify a higher amount in their Quote Messages to ensure persistence ofquote. Market makers may set a default amount which all Quote Messageswill specify unless an override is detected by the automated tradingsystem. The minimum value allowed is set at or above the maximum valuefor transactions and it is preferable that market makers are not able tooverride this minimum.

Bilateral credit between the market maker and market user counterpartiesis monitored at 67. Market User Views are generated 68 from QuoteMessages originating from market makers with whom the market user hassufficient credit to trade and is authorized to trade. Each customizedMarket User View is communicated to the appropriate market user.

In FIG. 5 b a Dealer at a market user workstation may view the price orprices detailed in the appropriate Market User Views. When a Dealer at amarket user wishes to execute a transaction he submits an Order Messageat 70 specifying the amount of the transaction and enough details of theQuote Message whose quote price he is viewing to identify a relevantQuote Message. If the market user is viewing a Dealable pricetheoretically the price may be offered by more than one market maker. Ifthis is the case, the Order Message is matched with the Quote Messagehaving the highest priority generated by a market maker with whom themarket user has adequate bilateral credit screened at 72. If the marketuser is viewing an Executable Price List, the Order Message willidentify the particular market maker whose price he wishes to take andany matching will be constrained to that market maker=s Quote Message.

The Order Message 70 is received by the transaction function 30 and ismatched by the automated trading system to the Quote Message of themarket maker whose price was selected at 74. The automated tradingsystem may perform some additional credit screening at 72 and, assumingthat everything is in order, executes the transaction at 76. ATransaction Confirmation Message is sent to both the market maker andmarket user counterparties at 78.

Dealers at both market maker and market user subscribers need to be ableto view the day=s transactions. As the automated trading system executesa trade between a market maker and a market user it transmits aTransaction Confirmation Message over the network to the market makerand market user broker nodes. The details of the trade contained in theTransaction Confirmation Message may be displayed at market maker andmarket user workstations in a Dynamic Transaction Summary (DTS) to showa dealer monitoring trading that a transaction has been executed.

The DTS may be displayed in real time for each currency pair beingtraded. The amount transacted that day or over a particular periodspecified by the dealer may be displayed by instrument/currency pair.

Advanced Features

To make the automated trading system a level playing field, account maybe taken of the physical locations of the various market users andmarket makers. Market users physically close to a particular marketmaker will otherwise receive Market User Views containing more recentQuote Messages which are, at that time, un-available to more remotemarket users leading to the closer market users being party to the mostfavorable transactions.

The automated trading system may provide an alarm function. Variousalarm systems are envisaged. Market makers may instruct the automatedtrading system of a number of circumstances about which the market makerwishes to be alerted. For example, a market maker may opt to be alertedwith a first level warning if the value of transactions executed thatday reaches a certain level or the general price for a currency pairestimated by the smalls pricing unit moves a set number of pips in aspecified time. A second level warning, accompanied by the market makerQuote Message being removed from the automated trading system, may alsobe provided. First and second level warnings for each currency pairand/or for all transactions would be configurable by the market maker.The alarm may be set to function when the total daily number of tradesexecuted on behalf of the market maker for each currency pair isexceeded or when the total trade volume across all currency pairs isreached. Other warnings may be based on the value or volume of executedtransactions.

Generally a first level warning will sound an audible alert and a secondlevel warning will suspend at least one type of transaction according tothe type of alert. The market maker will be able to reset the runningtotal counters associated with each warning or to reconfigure the firstand second warning levels at any time.

The automated trading system may also operate a number of securitymeasures. For example, it may require a market maker workstation totransmit an acknowledgement every X minutes if the market maker QuoteMessage is to remain within the automated trading system. If a dealer atthe market maker workstation does not react to a prompt or has not hit akey within the X minutes, a security alert signal may be transmittedfrom the market maker workstation to the automated trading system whichmay remove the market maker=s Quote Message and notify the market makervia a security acknowledgement signal sent to the market makerworkstation. This security measure can be particularly useful to preventtrading continuing after all the dealers at the market maker have leftthe trading floor, for example overnight.

If market user and market maker workstations are configured with thesame basic functionality, the subscriber category (e.g. market useronly, market maker only or both market maker and market user) is used bythe automated trading system to override bid and offer keys (for marketusers only) and buy and sell keys (for market makers only) on theworkstation.

The liquidity offered by automatic feeds setting the price in QuoteMessages for market makers minimizes dealer intervention. It offers amarket maker the means to extend dealing efficiently to include weakercurrency pairs.

Numerous modifications and changes to the automated trading system asdescribed above will readily occur to those skilled in the art. It isnot desired to limit the invention to the exact construction andoperation shown and described.

The smalls pricing engine 26 may be housed centrally in the automatedtrading system 22 rather than distributed over the network at eachBroker node. Similarly, credit management may be hosted by the serviceprovider or partially or wholly distributed between Broker Nodes. Theautomated trading system may be configured to minimize the amount ofinformation a Dealer at a market user must enter into the system toinitiate a transaction. For example, the system may create a defaultamount for a transaction based on the value of the previous transactionwhich the Dealer would need to override if he wished to specify adifferent amount for the new transaction. The Dealer would preferably bealerted that a default value was being used.

Customized Market User Views may be transmitted regardless of whether ornot a market user has an active session open. Alternatively, theautomated trading system may continuously monitor which market users arelogged on at any given time and only transmit Market User Views forthose market users who are logged on. The automated trading system mayautomatically cease transmission of Market User Views at the end of amarket user defined trading day.

A minimum credit level between market maker and market usercounterparties may be imposed by the automated trading system.Typically, for an automated trading system where the maximum value of asingle transaction is set at 1 million units, the minimum credit levelwould be 50,000 units. Provision for setting this minimum credit level,and/or the maximum transaction value, respective to the most expensivecurrency available for trade by the system, may be made. Any suchprovision would not prevent market maker or market user subscribers fromindicating to the automated trading system that they refuse to deal witha particular party.

What is claimed is:
 1. A method of matching instruments betweencounterparties in a computerized trading system having one or morecomputers, the method comprising: receiving quotes specifying a quoteamount and a quote price; identifying, from the received quotes, quotesthat specify the quote amount greater than a minimum quote amount, andproducing screened quote messages from the identified quotes; generatingmarket views from the screened quote messages using a processor;distributing the market views to one or more users of the tradingsystem; receiving orders after distribution of the market views, eachorder specifying an order amount and an order price; screening thereceived orders so as to produce screened order messages comprising onlythose received orders specifying the order amount less than a maximumorder amount; and matching screened order messages with appropriatescreened quote messages, wherein the minimum quote amount issubstantially equal to or greater than the maximum order amount.
 2. Themethod according to claim 1, further comprising: modifying each screenedquote message when an order message is matched therewith by decrementingthe quote amount specified in each screened quote message; and removingeach screened quote message from the market views when the quote amountspecified in each screened quote message is less than the minimum quoteamount.
 3. The method according to claim 1, wherein the order screeningrejects orders specifying an order amount greater than the maximum orderamount.
 4. The method according to claim 1, wherein the order screeningsegments an order specifying an order amount greater than the maximumorder amount into at least a first reduced value order and a secondreduced value order each specifying an order amount which is less thanthe maximum order amount.
 5. The method according to claim 4, whereinthe matching of screened order messages comprises matching the screenedorder message derived from the first reduced value order with anappropriate screened quote message.
 6. The method according to claim 4,wherein the order screening rejects at least the second reduced valueorder.
 7. The method according to claim 5, wherein the matching ofscreened order messages matches the at least second reduced value orderwith the appropriate screened quote message.
 8. The method according toclaim 1, further comprising: storing the screened quote messages in aquote available store; decrementing the quote amount specified in agiven screened quote message in the quote available store each time ascreened order message is matched therewith; and removing the givenscreened quote message from the quote available store when the quoteamount specified in that given screened quote message falls below theminimum quote amount.
 9. The method according to claim 8, whereinmatching of screened order messages comprises matching order messagesonly with those quote messages stored in the quote available store. 10.The method according to claim 1, wherein the screening of quotes isperformed, at least in part, on each of a plurality of trader terminalssuch that quotes specifying an amount less than the minimum quote amountare not transmitted to the trading system.
 11. The method according toclaim 8, wherein the quotes specifying an amount less than the minimumquote amount are removed from the quote available store.
 12. A computerreadable storage medium having stored thereon program code which, whenexecuted on a computer trading system for matching instruments causesthe computer to: receive quotes specifying a quote amount and a quoteprice; identify, from the received quotes, quotes specifying the quoteamount greater than a minimum quote amount, and produce screened quotemessages from the identified quotes; generate market views from thescreened quote messages using a processor; distribute the market viewsto one or more users of the system; receive orders after distribution ofthe market views, each order specifying an order amount and an orderprice; screening the received orders so as to produce screened ordermessages comprising only those received orders specifying the orderamount less than a maximum order amount; and matching the screened ordermessages with appropriate screened quote messages, wherein the minimumquote amount is substantially equal to or greater than the maximum orderamount.
 13. The computer readable storage medium according to claim 12,wherein the computer further: modifies each screened quote message whenan order message is matched therewith by decrementing the quote amountspecified in each screened quote message; and removes each screenedquote message from the market views when the quote amount specified ineach screened quote message is less than the minimum quote amount. 14.The computer readable storage medium according to claim 12, wherein theorder screening rejects orders specifying an order amount greater thanthe maximum order amount.
 15. The computer readable storage mediumaccording to claim 12, wherein the order screening segments an orderspecifying an order amount greater than the maximum order amount into atleast a first reduced value order and a second reduced value order eachspecifying an order amount which is less than the maximum order amount.16. The computer readable storage medium according to claim 15, whereinthe matching of screened order messages comprises matching the screenedorder message derived from the first reduced value order with anappropriate screened quote message.
 17. The computer readable storagemedium according to claim 15, wherein the order screening rejects atleast the second reduced value order.
 18. The computer readable storagemedium according to claim 16, wherein the matching of screened ordermessages matches the at least second reduced value order with theappropriate screened quote message.
 19. The computer readable storagemedium according to claim 12, wherein the computer further: stores thescreened quote messages in a quote available store; decrements the quoteamount specified in a given screened quote message in the quoteavailable store each time a screened order message is matched therewith;and removes the given screened quote message from the quote availablestore when the quote amount specified in that given screened quotemessage falls below the minimum quote amount.
 20. The computer readablestorage medium according to claim 19, wherein matching of screened ordermessages comprises matching order messages only with those quotemessages stored in the quote available store.
 21. The computer readablestorage medium according to claim 19, wherein the quotes specifying anamount less than the minimum quote amount are removed from the quoteavailable store.